On 28 September 2016, the European Banking Authority (“EBA”) published its Final Report and Guidelines on “remuneration policies and practices related to the sale and provision of retail banking products and services”.

The EBA had previously issued draft guidelines which were the subject of consultation between December 2015 and March 2016. The EBA received 27 response, 21 of which have been published on the EBA’s website.

As is the case with much of the new regulation in the financial services field, the rationale for the new guidelines is routed in the misconduct and mis-selling scandals of the recent past. To that end, the Guidelines are focused on removing financial and non-financial remuneration polices which incentivise the selling of specific banking products to consumers irrespective of the consumers’ rights and interests.

The Guidelines cover:

  1. The design of remuneration policies (for example, institutions should not design remuneration policies that are solely linked to a quantitative target for the offer or provision of banking services – guideline 1.6);
  2. The documentation of remuneration policies (for example, institutions should document all remuneration policies, keep them for at least five years and make them available to competent authorities upon request – guideline 2.1);
  3. The approval of remuneration policies (for example, changes to remuneration policies and practices should only be made with the approval of the management body – guideline 3.4);
  4. The monitoring of remuneration policies (for example, institutions should review their remuneration policies and practices to ensure compliance with the Guidelines at least annually – guideline 4.1).

The guidelines come into force on 13 January 2018 and can be found in full here.